Failure to Launch: Housing, Debt Overhang, and the Inflation Option During the Great Recession

Hedlund, Aaron

doi:10.2139/ssrn.2573263

Cited by 2 publications

(2 citation statements)

References 29 publications

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“…A household wealth effect, albeit due to revaluation of government debt, is also at the center of the mechanism explored by Sterk and Tenreyro (2018). 15 The quantitative model of Hedlund (2019) and the empirical framework of Slacalek, Tristani and Violante (2020) include both the present value and the cash flow channel.…”

Section: The Long-term Household Debt Channelmentioning

confidence: 99%

MoNK: Mortgages in a New-Keynesian model

Garriga

Kydland

Šustek

2021

Journal of Economic Dynamics and Control

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There has been much interest recently in the role of household long-term, mortgage, debt in the transmission of monetary policy. This paper offers a tractable framework that integrates the long-term debt channel with the standard New-Keynesian channel, providing a tool for monetary policy analysis that reflects the recent debates in the literature. As the model includes both short-and long-term debt, it provides a useful laboratory for the analysis of monetary policy operating not only through short-term actions, as has been done traditionally in the literature, but also through expected, persistent, changes in its stance.

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Section: The Long-term Household Debt Channelmentioning

confidence: 99%

MoNK: Mortgages in a New-Keynesian model

Garriga

Kydland

Šustek

2021

Journal of Economic Dynamics and Control

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“…8 Gomes, Jermann and Schmid (2013) focus on how monetary policy and nominal corporate debt affect firms' decisions. Krause and Moyen (forthcoming) and Hedlund (2016) study the consequences of inflating away nominal debt burden of government and FRM debt respectively. 9 7 A more general exploration of redistributive effects of monetary policy, beyond focusing on the nominal debt channel, is conducted by Coibion, Gorodnichenko, Kueng and Silvia (2012) on the basis of VAR analysis.…”

Section: Introductionmentioning

confidence: 99%

Nominal Rigidities in Debt and Product Markets

Garriga¹,

Kydland²,

Šustek³

2016

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Standard models used for monetary policy analysis rely on sticky prices. Recently, the literature started to explore also nominal debt contracts. Focusing on mortgages, this paper compares the two channels of transmission within a common framework. The sticky price channel is dominant when shocks to the policy interest rate are temporary, the mortgage channel is important when the shocks are persistent. The first channel has significant aggregate effects but small redistributive effects. The opposite holds for the second channel. Using yield curve data decomposed into temporary and persistent components, the redistributive and aggregate consequences are found to be quantitatively comparable. JEL Classification Codes: E32, E52, G21, R21.

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Failure to Launch: Housing, Debt Overhang, and the Inflation Option During the Great Recession

Cited by 2 publications

References 29 publications

MoNK: Mortgages in a New-Keynesian model

MoNK: Mortgages in a New-Keynesian model

Nominal Rigidities in Debt and Product Markets

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